According to the Decision on Amending the Law of the People's Republic of China on Individual Income Tax reviewed and adopted at the 18 th Session of the Standing Committee of the 10 th National People's Congress on October 27, 2005, the taxpayer "with individual income exceeding the amount stipulated by the State Council" shall declare taxes by himself/herself, widening the scope of self-declaration by taxpayers. Thereafter, the State Council stipulated that "the individual income exceeding the amount stipulated by the State Council" means "annual income of over RMB120,000" by amending the Implementing Rules of the Law on Individual Income Tax and authorized the State Administration of Taxation to formulate specific management measures. According to the provisions above and the principle of "providing convenience to taxpayers, regulating high incomes, facilitating tax collection and administration, and stressing on key management issues", the State Administration of Taxation formulated and issued the Self-Declaration Rules Concerning Individual Income Tax (Provisional) (hereinafter referred to as "Rules") after an in-depth study and repeated demonstration on the basis of the opinions of many taxpayers, withholding agents, experts, scholars and grassroots tax authorities. The Rules consist of eight chapters containing 44 articles, which define the specific operational methods of tax self-declaration from the aspects of the legal basis of the Rules, declarers, declaration content, declaration place, declaration period, way of declaration, declaration management, legal responsibility, and time of enforcement.

The Rules specify five cases in which taxpayers shall declare taxes to the tax authority by themselves:
1. With annual income of over RMB120,000;
2. Receiving salary and remuneration from two or more employers in China;
3. Generating income abroad;
4. Generating taxable income without withholding agent;
5. Other cases as specified by the State Council.

The Rules stipulate that the taxpayer with total taxable income of over RMB120,000 within a tax year in Case 1 shall declare taxes to the tax authority after the end of a year, no matter whether the tax on his/her taxable income in the year has been withheld by his/her withholding agent or has been declared and paid by the taxpayer to the tax authority on his/her own. The taxpayer in Cases 2-4 shall declare taxes from time to time, that is, when receiving taxable income, the taxpayer shall declare and pay tax to the tax authority within the specified period. Other cases as specified by the State Council in case 5 have not been clarified yet, and tax declaration rules will be formulated otherwise according to the specific conditions.

The Rules stipulate that any taxpayer with annual income of over RMB120,000 shall declare his/her annual income of all items, tax payable, paid (withheld) tax, tax credit, tax supplementation (refund) and relevant personal basic information within three months after the end of a tax year. The declared "annual income" contains 11 taxable income items specified in the Law on Individual Income Tax, i.e. salary and compensation, income from production and operation by individually-owned businesses, income from contract operation and operation under lease of public institutions, compensation for labor services, author's remuneration, royalty, interest, dividend and bonus, income from lease of property, income from transfer of property, incidental income, and other taxable income specified by finance department under the State Council. The Rules also define that three categories of tax-free income items excluded in the calculation of annual income, i.e. tax-free income specified in Items 1-9 of Article 4 of the Law on Individual Income Tax; income that is generated from China and is allowed to be free of tax as provided in Article 6 of the Implementing Rules of the Law on Individual Income Tax; the basic old-age insurance, medical insurance, unemployment insurance and public housing reserve fund contributed by units for individuals or by individuals in accordance with the provisions of Article 25 of the Implementing Rules of the Law on Individual Income Tax. The Rules also stipulate that the annual income of all items shall be calculated according to the gross income, except "the annual production and operation income of individually-owned businesses" and "the income from transfer of property" calculated on the basis of "taxable income".

For the convenience of self-declaration by taxpayers, the Rules stipulate that taxpayers may declare taxes in various ways, including data telegraph (e.g. online declaration) and mail declaration. They can also go to the tax authority directly to declare taxes, or declare taxes by other ways as provided by the tax authority. At the same time, it is stipulated that the taxpayer may entrust intermediary agencies or other persons qualified for tax agency service with tax declaration. The Rules also specify the requirements concerning the provision of quality service for taxpayers' self-declaration by tax authorities. For example, the tax authority shall have various declaration forms published on its website, or placed in the taxpayer servie office providing tax declaration services, for taxpayers to download or access from time to time free of charge; the tax authority shall remind the taxpayer with annual income of over RMB120,000 to declare tax on his/her own by appropriate ways in the legal declaration period; the tax authority accepting tax declaration shall handle the procedures of collection, supplementation, refund and set-off of tax according to the declaration of taxpayers, and issue duty paid proof according to regulations for taxpayers who have completed tax declaration and submitted tax; the tax authority shall hold the tax declaration information of taxpayers in confidence.

Moreover, the Rules also clearly define declaration place, declaration period, way of declaration, declaration management, legal responsibility and time of enforcement.

The formulation and distribution of the Rules is essential to implementing of the decision made at the 18 th Session of the Standing Committee of the 10 th National People's Congress to widen the scope of individual income tax self-declaration and giving full play to the role of individual income tax in regulating high incomes.

First, it will help cultivate taxpayers' consciousness of paying taxes in good faith according to the law, define legal responsibilities, and enhance the compliance with tax law. Since individual income tax is levied mainly by withholding the tax, before the amendment of the Law on Individual Income Tax, people with high income were not legally obligated to declare tax by themselves. Therefore, in case the withholding agent fails to withhold taxes and the individual fails to declare taxes, it is hard to define the legal responsibility of the individual who failed to declare taxes. To that end, the law only stipulates that withholding agents failing to withhold taxes shall be subject to punishment and individuals shall pay the taxes payable. The tax law revised last year stipulates that taxpayers with annual income of over RMB120,000 shall declare taxes by themselves. On the basis of the provisions of the law, the Rules clarify such matters as specific methods, requirements and legal responsibilities of tax self-declaration. The implementation of the Rules and the widening of the scope of self-declaration by taxpayers will effectively strengthen taxpayers' consciousness of paying taxes in good faith according to the law, define their legal responsibilities and further enhance their compliance with tax law.

Second, it will help strengthen the regulation of the incomes of high-income people. From the perspective of the practice of individual income tax collection and administration, the incomes of high-income people generally come in diverse and invisible channels and forms. However, tax authorities lack necessary information sources and thus are unable to well manage such people. That easily leads to defects in tax collection and administration. The revised tax law requires for the first time that any taxpayer with annual income of over RMB120,000 declare all taxable income obtained in the whole year to the tax authority, legally defining the taxpayer's obligation to declare taxes and legal responsibilities and broadening the channels for tax authorities to obtain individual income information. That will help tax authorities strengthen administration of tax sources, find out various income items of high-income people, intensify the tax regulation on high-income people, and mitigate the contradiction of unfair distribution of income.

Third, it will help further push forward the scientific and refined administration of individual income tax collection. Based on the arrangement and classification of detailed information submitted by withholding agents and information submitted by individuals, tax authorities can find out the key groups of people and key industries for the collection and administration of individual income tax, making the aim of individual income tax administration more clear; based on the cross comparison and analysis of detailed information submitted by withholding agents and information submitted by individuals, tax authorities can discover tax-related doubtful points and people not paying taxes in full, and provide case sources for tax inspectors. Therefore, it will help further push forward the scientific and refined administration of individual income tax collection.

Fourth, it will help accelerate the transition to the mixed tax system that combines comprehensive and classified tax systems. In the Decisions of the CPC Central Committee on Some Major Issues Concerning the Building of a Harmonious Socialist Society and the Outline of the 11 th Five-Year Plan for National Economic and Social Development of the People's Republic of China adopted at the Sixth Plenary Session of the 16 th Central Committee of the Party, it is clarified that China will implement an individual income tax system that combines comprehensive and classified tax systems. Since individual income is diverse and invisible at present and it is difficult for tax authorities to gain and monitor all individual income information, urging high-income people to declare taxes can continuously strengthen residents' consciousness of paying taxes in good faith according to the law and enhance the compliance with tax law; it can also create conditions and accumulate experience for the transition to a mixed tax system that combines comprehensive and classified tax systems in the future. Besides, obligating taxpayers to declare taxes by themselves on the basis of the withholding of taxes by withholding agents at the source is also in accordance with general international practice.